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Can the Job Market Party Continue in 2015?
The final employment report of 2014 is out, and it's official: last year was the best for US job growth since 1999. All told, the economy added some 252,000 jobs listing month, bringing the unemployment rate down to 5.6 percent—a 1.1 percent drop over the course of the past year. The gains rounded off a strong year for the job market, with the BLS reporting an average monthly gain of 246,000 positions in 2014. Those figures translated to some 1.7 million fewer unemployed people over the same period.
The biggest question, then, is whether the pace of growth can continue throughout 2015—and whether wage growth will follow in the wake? (Despite all the hiring, average hourly earnings rose by a tepid 1.7 percent over 2014).
While anyone who has read the disclaimer on the 401(K) election form will know that past performance is no guarantee of what might happen in the future, it's helpful to take a closer look at where some of the biggest gains and losses occurred in the job market in 2014, as we consider the landscape ahead for the coming year.
Fortunately, there are plenty of data points to suggest that the economy is gearing up for continued growth. One of the most positive signs: there were some 392,000 new positions created in the construction industry between December 2013 and December 2014—with the bulk of those positions either directly involved in construction of buildings (70,000 new jobs) or specialist contractors (225,000 new jobs). That suggests an uptick in homebuilding, as well as companies spending on new offices, facilities, etc.—both good signs.
Another indicator that this is a positive cycle: people appear to be buying cars to get to their new jobs. Auto dealers added 50,000 jobs over the year, while a further 40,000 positions—a gain of almost 20%—were created manufacturing vehicles and part to supply those dealers.
While all of that is great news for those in the manufacturing and construction industries, the corporate world did its part too—the BLS recorded some 668,000 new positions in professional and business services over the year. While it wasn't a great year for those in legal services (5,000 positions lost), almost every other sub-category gained big, including admin and support services (+ 366,000—almost half of whom were temps), management and tech consultants (+52,000), and building services (+116,000 ).
Health care was typically strong over the year, with 356,000 new positions in health and social care.
Perhaps the most positive indicator of all, however, is the increase in the leisure and hospitality sector—an area that was hit hard during the recession, and which tends to flourish when consumer confidence is high. All told, the sector added around 761,000 jobs last year, with more than half (469,00) in food services and drinking places. Sure, most of those positions will be hourly, but they're a sign that restaurants and bars are staffing up to meet demand—itself a sign that people are becoming ever more relaxed about spending money on non-necessities.
The down side
Even with all the good news, there were still a handful of industries where it was harder to get a job last year than in 2013. Chief among these: government, which is still downsizing in the aftermath of the recession, and which shed some 263,000 jobs over the course of 2014. Not that it's going to do much to reduce the size of the agencies actually running the country: most of the cuts came at state and local level, in the education sectors (losses of 103,000 and 276,000 respectively). Indeed, when education cuts are factored out, the government actually added more than 100,000 new positions.
In the private sector, meanwhile, physical retailers were the biggest losers—a fact that shouldn't come as a surprise to anyone who's been paying attention to their local mall recently. Clothing stores downsized by 182,000 employees last year, closely followed by department stores, which shed 175,000 workers. While it's tempting on one hand to look at that as evidence that the recovery is perhaps not as bright as suggested above, it's also likely that it has a lot to do with shifting consumer habits and the difficulty of competing with online retailers.
The outlook for 2015
So can 2015 repeat the trick? We can certainly hope so, and there's plenty of evidence to suggest that a positive cycle is well under way. But there are also reasons for concern—the parlous state of the Russian economy and its potential for roiling global markets chief among them. The effects of the price of oil will also make interesting watching over the coming months, not least because the oil and gas extraction industry added 12,000 jobs last year—positions that may be at peril if profitability becomes a concern for producers.
What’s your take on the year just ended, and the one to come? Have your say in the comments below, or find me on Twitter @vaultconsult
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